Notification to Transfer Agents and Registrars in relation to CSDR requirements
Clearstream Banking hereby informs and notifies the Transfer Agents and Registrars with which Clearstream Banking has engaged in registration of client positions, of the following regulatory requirements applicable to the reconciliation process with CSDs as set out in the Regulation EU 909/2014 on improving securities settlement in the EU and on central securities depositories (CSDR) and the delegated EU regulation 2017/392 (ESMA RTS):
CSDR Art 37.1 states:
“A CSD shall take appropriate reconciliation measures to verify that the number of securities making up a securities issue or part of a securities issue submitted to the CSD is equal to the sum of securities recorded on the securities accounts of the participants of the securities settlement system operated by the CSD and, where relevant, on owner accounts maintained by the CSD. Such reconciliation measures shall be conducted at least daily.”
CSDR Art 37.2 states:
“Where appropriate and if other entities are involved in the reconciliation process for a certain securities issue, such as the issuer, registrars, issuance agents, transfer agents, common depositories, other CSDs or other entities, the CSD and any such entities shall organise adequate cooperation and information exchange measures with each other so that the integrity of the issue is maintained.”
In this respect, Clearstream Banking is required to carry out a daily reconciliation with a view of ensuring the integrity of the issue.
In doing so, Clearstream Banking must reconcile the holding of a particular fund and registered account it maintains for its clients with the holding position as confirmed by the Transfer Agent or Registrar appointed by the fund in question.
Consequently, we are requiring Transfer Agents or Registrars to cooperate with Clearstream Banking in a way that allows it to comply with the reconciliation requirements set out in CSDR:
- The Transfer Agent or Registrar shall provide Clearstream Banking with an up-to-date statement of all holdings on the Position Account of Clearstream Banking as at the close of a Business Day.
- The Transfer Agent or Registrar shall provide Clearstream Banking with an up-to-date statement of all new transactions that have affected the Position Account of Clearstream Banking since the previous statement of transactions (if any), and as at the close of a Business Day.
Such statements shall be sent to Clearstream Banking by the Transfer Agent or the Registrar at the earliest opportunity the following Business Day (last deadline being 1 hour before cut off of the following Business Day).
If the Transfer Agent or Registrar is acting as agent for multiple funds with different cut off times, the earliest cut off time should be considered as the deadline for sending all relevant statements.
The Transfer Agent or Registrar shall prepare the relevant statements for every date that is a dealing date, also known as trade date, for one or more of the Fund Shares in question.
When there are no new transactions to report, a statement of holdings shall still be sent by the Transfer Agent or the Registrar to Clearstream Banking. It is recommended that the Transfer Agents or Registrars provide comprehensive, true, recent and up to date statements for all Fund Shares.
The statements shall be in a format as per the specifications published by Clearstream Banking below.
Clearstream Banking shall use the statements to reconcile holdings and transactions of Fund Shares with the records in its own books. Clearstream Banking shall inform the Transfer Agent or Registrar of any discrepancy it discovers without undue delay and if necessary on a daily basis. The Transfer Agent shall react promptly to this information with a view to resolving any such discrepancy.
In line with mandatory CSDR requirements, Clearstream Banking must investigate such reconciliation breaks in cooperation with Fund Agent (for example, Transfer Agent).
The CSD and Transfer Agent/Fund issuer have a mutual interest to ensure the CSD can maintain integrity of the part of the issuance at the CSD, by providing the information and collaborating on reconciliation.
In the case of critical breaks, these must be resolved by the following business day (that is, NAV cycle). If not, Clearstream Banking may suspend settlement of this fund instrument on its infrastructure.
The provision of statements to Clearstream Banking, in the manner described above, by the agent appointed by the fund, is a condition of eligibility and admission of the fund instrument in Clearstream Banking.
Key message from Clearstream Banking:
- Fund Agents (for example Transfer Agents) are required to provide daily (that is, NAV-timed) statements and prompt feedback on breaks.
- Identified and unresolved critical breaks may lead to strict settlement suspension, which may have a knock-on effect on NAV calculation of the fund, and may lead to ineligibility of the fund instrument in Clearstream Banking.
CSDR mandatory requirements require CSDs to review annually cooperation and information exchange measures with fund agents such as Transfer Agents and Registrars. Clearstream Banking will continue to review throughout the year its cooperation and information exchange measures with Transfer Agents and Registrars, based on the outcome of the reconciliation process, and when necessary approach such agents to resolve any deficiencies and ensure close adherence.
If you require further information or have questions related to specific areas, please contact Clearstream Banking’s Vestima Client Services team: email@example.com